Rauschenberg Estate Saga of Trust and Fees Explained

Prior to his death, Robert Rauschenberg (1925 – 2008) established a revocable trust, which is a type of estate planning tool that allowed him to change or even revoke the trust during his lifetime. The primary purpose of the trust was to benefit the Rauschenberg Foundation (“Foundation”), a non-profit organization, which supports artists and art related issues. The Foundation’s Board of Directors includes Christopher Rauschenberg, the artist’s son, along with several other members of the art and business communities. Named as Rauschenberg estate trustees were three of the artist’s long time friends and associates, including Darryl Pottorf, Ruaschenberg’s business partner and companion of over twenty-five years; Bill Goldston, a trusted business associate; and Bennet Gruntman, the artist’s accountant for over eighteen years. Shortly after Rauschenberg’s death, the three trustees and the Foundation became entangled in estate litigation after the trustees demanded $60 million in fees for administering the $600 million trust, an amount that the Foundation called “unconscionable.” On 1 August 2014, a Florida Circuit Court awarding the trustees’ fees in the amount of $24.6 million, to be split evenly among the three.

State law primarily governs the field of trusts and estates and under the Florida Trust Code trustees are entitled to “reasonable compensation” where fee terms have not been clearly articulated in a trust document. According to case law and common practice, the compensation may be [%] of the total value of the estate. Michael Gay, Partner at Foley & Lardner LLP in Orlando Florida, and lawyer for the trustees, claimed that the multi-million dollar compensation sought in this case was reasonable because the work required of the Trustees was extraordinary in nature and included having to handle copyright and tax issues. Gay also claimed that his clients created and executed a unique plan to prevent a decline in trust assets which involved minimizing the potential flood of art into the market, and managing several exhibitions and memorials to maintain and promote interest in the artist’s work. As evidence of their extraordinary management of the trust, appraisals were introduced to the court, which placed the value of the trust assets at $2.2 billion, up from $600 million just four years prior.

Christopher Rauschenberg, the artist’s son and Chairman of the Rauschenberg Foundation, who challenged the original invoice, claimed that reasonable compensation was closer to $375,000, to be split among the trustees. In an affidavit presented to the court, Laird Lile, a solo practitioner specializing in trust and estate law, and attorney for the Foundation estimated that the trustees were essentially demanding a rate of $40,000 per hour, having requested a total of $60 million in compensation for a maximum of 1500 hours of work. Estimates of the hours worked were provided because the trustees failed to keep accurate records of their time. Robert W. Goldman, attorney at Goldman Felcoski & Stone P.A. law firm, representing the Foundation, released a statement saying that a $60 million fee is a “monstrous affront to Bob’s testamentary intent.”

In reaching its decision, the Circuit Court for Lee County, Florida, applied the following set of factors regarding reasonable compensation, as set forth in West Coast Hospital Association v. Fla. National Bank of Jacksonville, 100 So. 2d 807, 811 (Fla. 1958).

The amount of the capital and income received and disbursed by the trustee;

The wages or salary customarily granted to agents or servants for performing like work in the community;

The success or failure of the administration of the trustee;

Any unusual skill or experience which the trustee in question may have brought to his work;

The fidelity or disloyalty displayed by the trustee;

The amount of risk and responsibility assumed;

The time consumed in carrying out the trust;

The custom in the community as to allowances to trustees by settlors or courts and as to charges exacted by trust companies and banks;

The character of the work done in the course of administration, whether routine or involving skill and judgment;

Any estimate which the trustee has given of the value of his own services; and

Payments made by the trust beneficiaries (cestuis) to the trustee and intended to be applied toward his compensation.

In its analysis, the court concluded that factors two, seven, eight and ten, were fairly neutral under these circumstances, and factors one, three, four, five, six and nine came out in favor of the trustees. Regarding factors one and three, the court noted that the Trustees were successful in managing the assets, which increased three-fold under their administration, although it acknowledged that the talent of the artist and favorable market conditions were contributing factors. The court points out that under factor four the Trustees possessed unusual skill and experience and were the “best possible Trustees for the estate” due to their familiarity with the artist and his business affairs. Furthermore, under factors five, six and nine, the court reasoned that the Trustees were loyal to the estate and assumed risk to their reputation in taking on the trusteeships, and that the character of their work was “exemplary.”

Christopher Rauschenberg was outspoken in his disappointment of Circuit Judge Jay B. Rosman’s decision and believes the award was excessive. On 13 August 2014, the Directors of the Foundation filed a notice to appeal, citing “serious concerns” about the court’s ruling. Christopher Rauschenberg has stated that his goal is to ensure that the trust benefits the Foundation, and not the Trustees.

During his lifetime, Rauschenberg was an avid philanthropist, and actively supported a variety of causes including AIDS research, environmental summits, and domestic violence, in addition to his more well-known art related initiatives. He established the Robert Rauschenberg Foundation for the purpose of continuing his philanthropic efforts after his death, a goal which his son is determined to see met.

About the Author: Jessica M. Curley is a recent graduate of the Benjamin N. Cardozo School of Law, and is pursuing her interest in art law and financial regulation in New York. She may be reached at jessicamcurley@gmail.com.

Disclaimer: This article is intended as general information, not legal advice, and is no substitute for seeking representation.